Legal alert: April 2019
SIGNUM regularly provides Legislative/Regulatory Alerts to keep Clients informed about important laws and regulatory changes in the Republic of Kazakhstan (“RK”). This Alert includes recent developments introduced in April 2019 related to:
Special economic and industrial zones and attraction of investments;
Development of business environment and regulation of trade activities;
Drugs/Medicines;
Advertising;
Extraordinary Presidential Elections.
1. Special Economic and Industrial Zones and Attraction of Investments
On 3 April 2019, the new Law No. 242-VI “On Special Economic and Industrial Zones” (“SEZ Law”) was signed. The SEZ Law stipulates the legal basis for SEZ and industrial zones’ functioning in the RK.
The SEZ Law, effective as from 16 April 2019, among other things, provides for:
Special legal regime and functioning conditions for the zones, including taxation, customs regulation, public-private partnership and guarantees of legal protection;
Creation of a single coordination center for the development, promotion and improvement of the investment attractiveness of the SEZ and industrial zones;
State funding of management companies and responsibility matters. Funding will be provided only subject to the state’s 100% ownership of the management company;
New mechanism for granting the land plots to the participants of the SEZ and industrial zones. Land plots will be provided to the management company for temporary land use, which will then at its discretion further assign to the participants of the zones;
Extension of the SEZ’s operation term based on the Government’s decision.
On 2 April 2019, the President of the RK signed the Law No. 243-VI1 aimed at bringing the current legislation in accordance with the SEZ Law,, and it came into force on 16 April 2019 similar to the SEZ Law.
We would like to note the following changes:
1) changes to the Land Code of the RK2 entitling the participants of the SEZ, industrial zones of republican and regional significance to buy out the land plots used for the purposes of such zones in the following cases:
after the expiration of the SEZ’s operation term, subject to the fulfillment of contractual commitments stipulated by the SEZ agreement;
at any time, subject to commissioning of all objects outlined in the project of the participant of the industrial zone of republican or regional significance.
2) introduction of the “one stop shopping” concept for investors in the Business Code of the RK3, which offers a centralized form of assistance to investors by the National Company on Attracting Investments. It is intended that such type of assistance will minimize the investors’ actual involvement in collection and preparation of documents and minimize their direct contact with government agencies.
2. Development of Business Environment and Regulation of Trade Activities
On 14 April 2019, the Law of the RK No. 241-VI dated 2 April 2019 “On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on the Development of the Business Environment and Regulation of Trade Activities” entered into force (“Law No. 241-VI”)4.
Law No 241-VI provides for amendments to dozens of legal acts of the RK, including various codes and laws of the RK aimed at:
Creating favorable conditions for entrepreneurship and investment flow in the trade sector;
Improving tax and customs administration;
Improving electronic and exchange trade, as well as trade in the field of agro-industrial complex;
Strengthening the activity of the antimonopoly body and consumer protection;
Improving relationship between business and government agencies, etc.
Legal Entities Liquidation Matters (novelties):
When selling a pledged property through a public auction as part of a legal entity’s liquidation process, the high-ranked claims of the secured creditors are satisfied within the amount received from the sale of the pledged property. In case of insufficiency of the same, the remaining claims are satisfied as per the ranking of claims set forth by the Civil Code of the RK5.
If the pledged property is included in the property of the liquidated legal entity, the secured creditor is entitled to satisfy its claims by accepting the pledged property in kind. The liquidation commission undertakes an assessment of the property within 10 business days following the date of receipt from the secured creditor of the notice of acceptance of the pledged property in kind.
If the estimated value of the pledged property minus the expenses incurred for valuation of the same exceeds the claims of the secured creditor, the difference must be returned by the secured creditor to the legal entity being liquidated.
If the estimated value of the pledged property minus the expenses incurred for valuation of the same is less than the claims of the secured creditor, the unsatisfied portion of the claims of the secured creditor shall be settled as per the ranking of claims set forth by the Civil Code of the RK.
Satisfying Creditor Claims (novelties):
Statutory provisions with respect to the third and fifth ranks of claims were changed. High-ranked claims which can be satisfied by means of public auction within the amount received from the sale of the pledged property and claims of the secured creditors that can be satisfied by accepting the pledged property in kind - are now excluded from the third rank. In addition to payments due to other creditors as per Kazakh laws, the fifth rank now covers the payments to the secured creditors whose claims are satisfied in the event the proceeds from the sale of the collateral are not sufficient, as well as when the estimated value of the pledged property minus the expenses incurred for valuation of the same is less than the creditor’s claims.
Pledge of Goods in Circulation (novelties):
Subject to the parties’ agreement, a pledge agreement may provide for that the total value of the pledged goods in circulation shall not become less than the value initially specified in the pledge agreement. The value of the pledged goods in circulation can be reduced proportionately as against the fulfilled secured obligations unless otherwise provided by the pledge agreement.
Electronic Judicial Proceedings (novelties):
The Civil Procedure Code of the RK6 is supplemented with a new chapter on e-justice. Civil proceedings are conducted in paper or electronically at the claimant’s choice. Electronic proceedings result in an electronic civil case. Procedural acts and actions of the court, persons involved in the case, can be executed in the form of an electronic document certified by an electronic digital signature. These documents are equivalent to those in writing, except when Kazakh laws explicitly prohibit using an electronic document. The original of the judicial act is an electronic judicial act placed in the automated information system of the court.
Commodity Exchange (novelties):
As part of improving the legislation in the field of commodity exchange, a concept of market price was introduced. Market price is defined as a price formed as a result of pure competition and free access of business entities to exchange trading. Commodity exchange trading item is now detailed depending on the specific method of trade.
The classic auction as well as the licensing institute for brokers and dealers, are now all abolished. At the same time, liability of the business community is enhanced by keeping in place accreditation of brokers and dealers on stock exchanges and introducing voluntary professional self-regulation.
Marking (novelties):
In order to reduce the shadow economy and combat counterfeit products, special rules for marking and traceability of goods are not introduced. The list of goods subject to mandatory marking will be approved by the Government in coordination with business entities.
The Law of the RK No. 544-II dated 12 April 2004 “On Regulation of Trade Activity” was, among others, supplemented with the following new concepts:
“Marked goods” - goods that are duly marked with identification means and which reliable information (including information on identification means and/or material medium with identification means) is placed in the national component of the product marking information system;
“Single marking and traceability operator” - a legal entity established in accordance with Kazakh laws, which develops, administers and maintains an information system for marking and traceability of goods, including development, maintenance and update of the National Product Catalog, as well as other functions determined by the Government of the RK and government agencies.
Domestic traders are required, among other things, to sell marked goods subject to marking in accordance with international agreements and (or) Kazakh laws in the manner determined by the government authority in the field of marking and traceability of goods.
3. Drugs/Medicines
On 28 December 2018, the Law of the RK No. 211-VI “On Introducing Amendments and Additions to Some Legislative Acts of the Republic of Kazakhstan on the Circulation of Drugs and Medical Products” (“Law No. 211-VI”) was signed. The Law No. 211-VI entered into force on 19 January 2019, save for certain provisions.
As from 9 April 2019, among others:
Government-regulated Prices for Drugs
The Law No. 211-VI introduced state regulation of prices for drugs or medical devices which covers the drugs registered and circulated in the RK in accordance with the rules for regulation of prices for drugs approved by the respective government agency. Once semi-annually no later than the 10th day of the month following the reporting half of the year the authorized body approves the maximum prices for the drug’s trade name for retail sale and wholesale, indicating the method of their calculation, the data based on which the price was formed. All information on the maximum wholesale and retail prices will be posted on the website of the Ministry of Health of Kazakhstan.
Ethical Promotion of Drugs and Medical Devices
Ethical promotion of drugs and medical devices is defined as an activity carried out in the process of promoting safe, high-quality and effective medicines, and medical products from the developer and/or manufacturer of a medicinal product or a medical product to consumer use, based on fair competition and responsibility of all parties involved.
In order to exclude medical professionals’ personal interests in receiving remuneration, they are now prohibited from advertising medicines and medical devices, as well as from recommending patients purchasing drugs from certain retail sellers.
Medical professionals must within their competence write prescriptions for medicines if there are appropriate medical indications under the international non-proprietary name, save for the cases of the patient’s individual idiocrasy.
Medicines and medical devices retail sellers are required to offer a buyer (patient) the medicines that match the prescription, along with all other available drugs, their price and special warnings and precautions for use.
Representatives of manufacturers of medicines and medical devices and (or) distributors are prohibited from promoting medicines and medical devices in medical and educational organizations in the field of health care, save for the cases of routine medical conferences, scientific and practical conferences and (or) specialized seminars.
New concepts have been introduced into the Public Health and Health System Code of the RK7:
“Marginal price for a drug’s trade name for retail sale” - the maximum price for retail sale of the trade name of the drug;
"Drug marginal price" - the maximum price for drug sale;
"Manufacturer of drugs" - an organization with a special manufacturing license engaged in the production of drugs;
“Register of authorized persons of manufacturers of drugs” - an information resource of the government agency in the field of health care, containing information about authorized persons of manufacturers of medicinal products;
"Rational use of medicines" - drug treatment, corresponding to clinical indications, in doses that meet the individual needs of the patient, for a sufficient period of time and at the lowest cost;
“Web portal for purchase of drugs and medical devices” - an information system that provides a single access to electronic purchases of drugs and medical devices within the guaranteed volume of free medical care and in the system of mandatory social health insurance;
“A single operator in the field of procurement of drugs and medical devices” - a legal entity as determined by the government agency in the field of health care in coordination with the government agency in the field of public procurement.
4. Advertising
On 8 January 2019, the Law of the RK No. 215-VI “On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Advertising” (“Law No. 215-VI”) was adopted. A number of important changes in this law came into force on 11 April 2019:
Violation of Kazakh laws in the sphere of advertising, committed in the form of:
1) unfair and unreliable advertising, save for certain cases specifically provided for by the Administrative Code8;
2) unethical and hidden advertising;
3) advertisements in the days of national mourning on television and radio channels;
4) advertising in the form of various events, including prize draws, lotteries, aimed at stimulating demand and interest in alcoholic beverages, tobacco and tobacco products;
5) interruptions by advertising, including by means of a running line, broadcasting official messages, speeches by candidates for the presidency of the RK and members of representative bodies, educational and religious television programs, as well as demonstrations of children's television programs, with the exception of advertising intended for children and adolescents;
6) interruption by advertising of film demonstration in film and video services, with the exception of breaks between series;
7) placing outdoor (visual) advertising on historical and cultural monuments and in their protection zones, on religious buildings (structures) and on the territory allotted to them and their fences, as well as on specially protected natural territories;
8) advertising of a residential house (residential building) under construction or commissioned that does not meet the classification requirements of residential house (residential buildings) set forth by the approved design documentation;
9) advertisements of religious associations and religious (religious) educational organizations that are not registered in accordance with Kazakh laws,
entail a penalty of 20 monthly calculated indices (MCI) on individuals, 70 MCI on officials, 100 MCI on small-sized businesses or non-profit organizations, 200 MCI for medium-sized businesses, 400 MCI for large businesses (MCI for 2019 is KZT 2,525).
When advertising a product (work, service) to be sold in the RK, the price (tariffs, rates) must be indicated in tenge.
Obtaining a permit is now required only for the advertising structure itself, the structure where the advertisement will hang. Notification is filed for the advertising picture. A permit must be obtained once, while a notification must be filed every time the advertising picture is changed.
5. Extraordinary Presidential Election
On 9 April 2019, extraordinary elections for the President of the RK were scheduled for 9 June 2019. The Central Election Commission of the RK approved the Schedule of the main activities for preparation and holding the extraordinary elections of the President of the RK.
The determination of the election results takes place no later than seven days following the elections, i.e. no later than 16 June 2019, and the publication of the results in the media, i.e. no later than 10 days following the election date, i.e. no later than 19 June 2019.
Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please note that Kazakhstan is an emerging economy, and its legislation and legal system are in constant development. Should you have any questions or want to discuss matters addressed in this Client Update, please contact us.
- “On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Special Economic and Industrial Zones, Attracting Investments, Developing and Promoting Export, and Social Security”
- Land Code of the RK № 442-II dated 20 June 2003
- Code of the RK № 375-V dated 29 October 2015 “the Business Code of the Republic of Kazakhstan”
- Entered into force on 14 April 2019 (save for certain exclusions)
- Civil Code of the RK (General Part), adopted by the Supreme Soviet on 27 December 1994
- Code of the RK № 377-V dated 31 October 2015 “Civil Procedure Code of the Republic of Kazakhstan”
- Code of the RK № 193-IV dated 18 September 2009 “On Public Health and Health System”
- Code of the Republic of Kazakhstan On Administrative Violations № 235-V dated 5 July 2014
